First-time Buyers` Power Slips

October 09, 1988|By J. Linn Allen.

If current trends persist, middle-income families may be unable to buy homes until late in life and lower-income renters may be frozen out of decent housing, according to top officials of the National Association of Realtors

(NAR).

``The purchasing power of the first-time home buyer compared with that of the overall home-buying public has deteriorated to its worst point in a decade,`` said NAR president Nestor Wiegand Jr. in a press conference here to unveil the association`s new first-time home buyers affordability index.

The index, put at 79.8 for the second quarter of 1988, means that the typical first-time buyer had less than 80 percent of the income needed to qualify for a mortgage on a typically priced existing starter home.

The level was more than 30 percent below the 114.1 reading for the NAR composite housing affordiability index, which measures affordability for all purchasers of existing homes.

NAR chief economist John Tuccillo noted that home ownership in the 25-to- 34 age group, historically the first-time home buying years in this country, had declined from 42 percent in 1980 to 28 percent in 1987.

This situation, Tuccillo declared, is creating a ``clogged pipeline`` in which families who delay the decision to buy a home create pressure on the supply of rental housing that ultimately victimizes the poor.

``The one who suffers is not the one who has to defer the decision but the person whose foot is just on the housing ladder and finds he can`t move up,`` he said. ``You have a chain of events that start with deferral of the home ownership decision and eventually costs the person who has the least ability to sustain that cost.``

Calling for a comprehensive national housing policy, Weigand recommended allowing the use of tax-deferred savings plans for downpayments on a home, raising Federal Housing Administration mortgage limits, and expanding use of adjustable-rate mortgages for borrowers using FHA-insured loans.